Question 1

Figure 14-7  
-Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is

Accepted Answer

A) $80 at Q = 270. 
B) $100 at Q = 322. 
C) $175 at Q = 515. 
D) None of the above are correct. 
A) $80 at Q = 270. 
B) $100 at Q = 322. 
C) $175 at Q = 515. 
D) None of the above are correct.

Question 2

Table 14-12  
-Refer to Table 14-12. What is the marginal revenue from selling the 1st unit?

Accepted Answer

A) $30 
B) $50 
C) $80 
D) $160 
A) $30 
B) $50 
C) $80 
D) $160

Question 3

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants, which of the following is most likely to arise?

Accepted Answer

A) The long-run market supply curve will be upward sloping. 
B) The condition of free entry into the market will be violated. 
C) Producer profits will fall in the long run. 
D) The long-run market supply curve will be horizontal as new firms enter and drive the price downward. 
A) The long-run market supply curve will be upward sloping. 
B) The condition of free entry into the market will be violated. 
C) Producer profits will fall in the long run. 
D) The long-run market supply curve will be horizontal as new firms enter and drive the price downward.

Question 4

If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease substantially because your local gas station

Accepted Answer

A) has little or no market power. 
B) is small relative to the size of the gasoline market. 
C) is a competitive firm. 
D) All of the above are correct. 
A) has little or no market power. 
B) is small relative to the size of the gasoline market. 
C) is a competitive firm. 
D) All of the above are correct.

Question 5

Table 14-12  
-Refer to Table 14-12. What is the average revenue when 4 units are sold?

Accepted Answer

A) $0 
B) $68 
C) $80 
D) $400 
A) $0 
B) $68 
C) $80 
D) $400

Question 6

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves:  
-Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

Accepted Answer

A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. 
B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. 
C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. 
D) Because the price is below the firm's average variable costs, the firms will shut down. 
A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. 
B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. 
C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. 
D) Because the price is below the firm's average variable costs, the firms will shut down.

Question 7

The competitive firm's short-run supply curve is its

Accepted Answer

A) marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost. 
B) marginal cost curve. 
C) marginal cost curve, but only the portion above the minimum of average total cost. 
D) marginal cost curve, but only the portion above the minimum of average variable cost. 
A) marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost. 
B) marginal cost curve. 
C) marginal cost curve, but only the portion above the minimum of average total cost. 
D) marginal cost curve, but only the portion above the minimum of average variable cost.

Question 8

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

Accepted Answer

At 45 units of outpu

Question 9

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  
-Refer to Figure 14-1. If the market price is $5.00, the firm will earn

Accepted Answer

A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run. 
A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run.

Question 10

A firm's marginal cost has a minimum value of $80, its average variable cost has a minimum value of $90, and its average total cost has a minimum value of $100. Then the firm will shut down in the short run once the price of its product falls below

Accepted Answer

A) $100. 
B) $90. 
C) $80. 
D) $40. 
A) $100. 
B) $90. 
C) $80. 
D) $40.

Question 11

A firm in a competitive market has the following cost structure:
Output
Total Costs
0
$10
1
$12
2
$15
3
$19
4
$24
5
$30
6
$37
7
$46
8
$55
9
$65
If the market price is $8, how many units of output should the firm produce to maximize profit?

Accepted Answer

A) 5 units 
B) 6 units 
C) 7 units 
D) 8 units 
A) 5 units 
B) 6 units 
C) 7 units 
D) 8 units

Question 12

In the long run, a firm will exit a competitive industry if

Accepted Answer

A) total revenue exceeds total cost. 
B) the price exceeds average total cost. 
C) average total cost exceeds the price. 
D) Both a and b are correct. 
A) total revenue exceeds total cost. 
B) the price exceeds average total cost. 
C) average total cost exceeds the price. 
D) Both a and b are correct.

Question 13

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) None of the above is correct. 
A) P1. 
B) P2. 
C) P3. 
D) None of the above is correct.

Question 14

Which of the following represents the firm's long-run condition for exiting a market?

Accepted Answer

A) exit if P < MC 
B) exit if P < FC 
C) exit if P < ATC 
D) exit if MR < MC 
A) exit if P < MC 
B) exit if P < FC 
C) exit if P < ATC 
D) exit if MR < MC

Question 15

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Accepted Answer

A) $6. 
B) $7. 
C) $8. 
D) $9. 
A) $6. 
B) $7. 
C) $8. 
D) $9.

Question 16

Table 14-3
The table represents a demand curve faced by a firm in a competitive market.  
-Refer to Table 14-3. For this firm, the average revenue is

Accepted Answer

A) $39. 
B) $26. 
C) $13. 
D) $0. 
A) $39. 
B) $26. 
C) $13. 
D) $0.

Question 17

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

Accepted Answer

A) Jose's restaurant is earning a positive economic profit. 
B) Jose's restaurant should shut down immediately. 
C) Jose's restaurant is losing money in the short run but should continue to operate. 
D) the market price will rise in the short run to increase profits. 
A) Jose's restaurant is earning a positive economic profit. 
B) Jose's restaurant should shut down immediately. 
C) Jose's restaurant is losing money in the short run but should continue to operate. 
D) the market price will rise in the short run to increase profits.

Question 18

A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a

Accepted Answer

A) profit of more than $27. 
B) profit of exactly $27. 
C) loss of more than $27. 
D) loss of exactly $27. 
A) profit of more than $27. 
B) profit of exactly $27. 
C) loss of more than $27. 
D) loss of exactly $27.

Question 19

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. At Q = 999, the firm's profits equal

Accepted Answer

A) $4,990. 
B) $5,000. 
C) $5,020. 
D) $5,030. 
A) $4,990. 
B) $5,000. 
C) $5,020. 
D) $5,030.

Question 20

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output

Accepted Answer

A) is less than 1,000 pounds. 
B) is still 1,000 pounds. 
C) is more than 1,000 pounds. 
D) becomes zero. 
A) is less than 1,000 pounds. 
B) is still 1,000 pounds. 
C) is more than 1,000 pounds. 
D) becomes zero.

Exam 14: Firms in Competitive Markets

Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is

Table 14-12 -Refer to Table 14-12. What is the marginal revenue from selling the 1st unit?

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants, which of the following is most likely to arise?

If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease substantially because your local gas station

Table 14-12 -Refer to Table 14-12. What is the average revenue when 4 units are sold?

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

The competitive firm's short-run supply curve is its

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $5.00, the firm will earn

A firm's marginal cost has a minimum value of $80, its average variable cost has a minimum value of $90, and its average total cost has a minimum value of $100. Then the firm will shut down in the short run once the price of its product falls below

A firm in a competitive market has the following cost structure: Output Total Costs 0 $10 1 $12 2 $15 3 $19 4 $24 5 $30 6 $37 7 $46 8 $55 9 $65 If the market price is $8, how many units of output should the firm produce to maximize profit?

In the long run, a firm will exit a competitive industry if

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed

Which of the following represents the firm's long-run condition for exiting a market?

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the average revenue is

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's profits equal

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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